Notes to Consolidated Financial Statements

NOTE 10

LEASING ARRANGEMENTS

As Lessor

We are the lessor in leveraged and direct financing lease agreements for commercial aircraft and power generating facilities, which comprise the
majority of the portfolio along with telecommunications equipment, real estate property, and other equipment. These leases have remaining terms
up to 48 years as of December 31, 2007. Minimum lease payments receivable represent unpaid rentals, less principal and interest on third-party nonrecourse
debt relating to leveraged lease transactions. Since we have no general liability for this debt, which holds a senior security interest in the leased
equipment and rentals, the related principal and interest have been offset against the minimum lease payments receivable in accordance with GAAP.
All recourse debt is reflected in our consolidated balance sheets. See Note 3 for information on lease impairment charges.

Finance lease receivables, which are included in Prepaid Expenses and Other and Other Assets in our consolidated balance sheets are comprised of
the following:

(dollars in millions)

At December 31,

2007

2006

LeveragedLeases

DirectFinanceLeases

Total

LeveragedLeases

DirectFinanceLeases

Total

Minimum lease payments receivable

$

2,959

$

131

$

3,090

$

3,311

$

128

$

3,439

Estimated residual value

1,434

16

1,450

1,637

18

1,655

Unamortized initial direct costs

—

1

1

—

—

—

Unearned income

(1,483

)

(25

)

(1,508

)

(1,895

)

(22

)

(1,917

)

$

2,910

$

123

3,033

$

3,053

$

124

3,177

Allowance for doubtful accounts

(168

)

(175

)

Finance lease receivables, net

$

2,865

$

3,002

Current

$

36

$

40

Noncurrent

$

2,829

$

2,962

Accumulated deferred taxes arising from leveraged leases, which are
included in Deferred Income Taxes, amounted to $2,307 million at
December 31, 2007 and $2,674 million at December 31, 2006.

The following table is a summary of the components of income from
leveraged leases:

(dollars in millions)

Years Ended December 31,

2007

2006

2005

Pretax lease income

$

78

$

96

$

119

Income tax expense/(benefit)

30

57

(25

)

Investment tax credits

4

4

4

The future minimum lease payments to be received from noncancelable
leases, net of nonrecourse loan payments related to leveraged and direct
financing leases for the periods shown at December 31, 2007, are as follows:

(dollars in millions)

Years

Capital Leases

Operating Leases

2008

$

127

$

29

2009

215

23

2010

136

16

2011

110

10

2012

110

9

Thereafter

2,392

16

Total

$

3,090

$

103

As Lessee

We lease certain facilities and equipment for use in our operations under
both capital and operating leases. Total rent expense from continuing
operations under operating leases amounted to $1,712 million in 2007,
$1,608 million in 2006 and $1,458 million in 2005.

Amortization of capital leases is included in depreciation and amortization
expense in the consolidated statements of income. Capital lease
amounts included in plant, property and equipment are as follows:

(dollars in millions)

At December 31,

2007

2006

Capital leases

$

329

$

359

Accumulated amortization

(153

)

(160

)

Total

$

176

$

199

The aggregate minimum rental commitments under noncancelable
leases for the periods shown at December 31, 2007, are as follows:

(dollars in millions)

Years

CapitalLeases

OperatingLeases

2008

$

75

$

1,489

2009

63

1,276

2010

59

1,016

2011

55

756

2012

38

497

Thereafter

132

1,967

Total minimum rental commitments

422

$

7,001

Less interest and executory costs

(110

)

Present value of minimum lease payments

312

Less current installments

(46

)

Long-term obligation at December 31, 2007

$

266

As of December 31, 2007, the total minimum sublease rentals to be
received in the future under noncancelable operating and capital subleases
were $50 million and $22 million, respectively.

* This is an interactive electronic version of Verizon’s 2007 Annual Report to Shareowners, and it is intended to be complete and accurate.
The contents of this version are qualified in their entirety by reference to the printed version. A reproduction of the printed version is
available in PDF format on this website.